Indonesia’s President Joko Widodo unveiled plans this week for a “big bang” loosening of restrictions on foreign investment covering nearly 50 sectors of the economy – including the logistics sector – in order to stimulate economic expansion to reach a 7.0 per cent year-on-year gross domestic product (GDP) growth rate by 2019.
The changes to Indonesia’s Negative Investment List (Dafter Negatif Investasi) – the document that stipulates to what extent foreign investors can own businesses in Indonesia – will impact the air cargo supply chain sector in the areas of Transport Supporting Services which will rise to a permitted 67 per cent foreign ownership (from 49 per cent), Warehouse Distributor up to 67 per cent (from 33 per cent), and Cold Storage which moves to 100 per cent (from 33 per cent).
Zaldy Ilham Masita, chairman of the Indonesian Logistics Association, was quoted by the Indonesia Investments online publication as welcoming the government’s plan to open up room for foreign investment in the nation’s logistics sector. This he said, will help to curtail logistics costs, hence improving domestic competitiveness. Given Indonesia has entered the era of the ASEAN Economic Community, it is important to improve the country’s competitiveness.
In its 2014 Logistics Performance Index (LPI), the World Bank ranked Indonesia in 54th position with a score of 3.08, ahead of fellow ASEAN member the Philippines at 57th, but far below those such as Singapore, Malaysia and Thailand that ranked 5th, 25th and 35th, respectively.
Another key area being opened up to foreign ownership is the e-commerce sector. For foreign investors Indonesia’s e-commerce sector is an attractive market, with the Indonesian E-commerce Association (idEA) estimating that the number of online shoppers in Indonesia could reach 10 million this year as the country’s middle class continues to grow. The e-commerce business is projected to rake in Rp 20 trillion (US$1.49 billion) this year, double from last year’s estimated Rp 10 trillion.
Southeast Asia’s largest economy has been growing at its slowest pace in six years because of falling commodity prices and slowing growth in the economy of its major trading partner China. But Widodo told Reuters in an interview he was very optimistic that growth would rebound to 5.3 per cent this year after a slide to 4.8 per cent in 2015. “There are 49 sub-sectors [that will be affected] so in my opinion this is the big bang,” the President said in reference to the liberatlisation.
The country’s trade minister, Thomas Lembong, told Reuters that the sweeping changes planned for the so-called ‘Negative Investment List” signaled a greater openness to foreign investment and would go some way in preparing the country for free trade agreements, including the ASEAN Economic Community and eventually, the Trans-Pacific Partnership (TPP).
Widodo’s rise from businessman to president of the world’s third-largest democracy — and the first to come from outside the political or military establishment — was widely seen in 2014 as a watershed moment for Indonesia. The president said there were two prongs to his growth strategy: Deregulation to create competition, efficiency and better services, and infrastructure development. But since his election he has faced a lumbering bureacuracy, corruption and obstruction by vested interests keen on maintaining the status quo.
